BT yesterday announced ambitious plans for new entertainment and communication services designed to boost the take-up of broadband internet access.

The company is hoping for five million broadband customers by 2006, but with the two million mark passed last month, Pierre Danon, the head of BT's retail division, admitted "getting to 5m is not going to be a cruise".

"What we need is to excite the market to show that broadband can transform the life of consumers."

The group plans to take on the pay-TV industry with a new service enabling everyone from broadcasters to local interest groups to supply broadband users with shows and films of DVD-like quality. It has developed a complete digital rights management suite that will allow video to be distributed for a fee, and will announce a number of content partners early next month.

BT also announced plans for a broadband telephone service that will allow people to make calls from PCs to other PCs, landlines and mobiles via Yahoo's instant messenger.

Internet users worldwide spent 3bn minutes chatting on instant messenger platforms last year. BT reckons that one in 10 of those chats culminated in a phone call and it is hoping its voiceover internet protocol service will capture a slice of that market.

There will be a trial of the service in May with a launch in September. While calls from one PC to another using the same technology will be free, calls to landlines and mobiles will be charged. Rival AOL will launch a similar service next month, with Tiscali poised to follow later in the year.

BT hopes that broadband, on which the group said it should start making money next year, will help plug the gap left by declining revenues in its core residential telephone business. Speculation that the firm might buy back its former mobile business, MMO2, to speed up this process was quashed yesterday by Mr Danon. "That could cost us several billion," he said. "Frankly, we do not have the bloody money."

Hopes that KPN will return with a revised offer for MMO2, after being rebuffed two weeks ago, were also dampened by news yesterday that the Dutch telecommunications group is spending €1.4bn (£950m) buying back shares and debt. KPN added that it is not in talks with MMO2